SAP seeks an edge from NSA surveillance worries

SAP may build a second data center in Australia in order to meet customer demand for locally delivered cloud services in the wake of revelations over the U.S. National Security Agency's Prism surveillance program.

"When I talk to the public sector . . . it's clear they will only consume cloud if we can guarantee their data stays here in Australia. And we are ready for that," co-CEO Jim Hagemann Snabe told the Australian Financial Review in a report published Monday.

Former NSA contractor Edward Snowden's stream of leaks about the agency's spying programs have changed the game for tech vendors, Snabe told the AFR.

"I think the stakes have moved up," Snabe said. "People have realized that you need to manage the data center in a physical location where the jurisdiction fits your assumptions."

"What we see today is that the first question asked in Europe and Asia is, 'where is your data center?' and the second is, 'can you guarantee that the data stays in that physical location?," Snabe added. "That gives us a huge competitive advantage."

SAP spokesman James Dever didn't dispute any statements attributed to Snabe in the AFR report on Tuesday, but said any notion that SAP is cashing in on the NSA controversy is "overstated."

"We're building out a network of global data centers, so that's true and in our plans," Dever said. "It meets the growing demand for our cloud business."

However, for years, "many companies have preferred a local or regional option for where they house their data," Dever added. "The global network gives us an advantage, NSA or no NSA."

Heavily globalized cloud vendors such as SAP, Oracle and IBM may choose a softer-sell approach, but nonetheless seem well-positioned to serve customers who are too nervous to continue using U.S.-based cloud services.

The Cloud Security Alliance released a survey in July in which 56 percent of non-U.S. respondents expressed reluctance about using U.S.-based cloud services following the NSA program revelations.

A report released in August by the Information Technology and Innovation Foundation concluded that the U.S. cloud computing industry could lose US$22 billion to $35 billion over the next three years as customers move their data to foreign providers.